Retirement Plans Newsletter

January 3, 2018 logo logo
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Employee Benefits Associate
Wiggin and Dana LLP
in CT

Retirement Plan Relationship Manager
Alpha Pension Group
in MA, Telecommute

Senior Legal Editor
Bloomberg BNA
in VA

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[Guidance Overview]

Annual IRS Revenue Procedure Includes Surprising Drop in Certain User Fees
"[IRS Rev. Proc. 2018-1] updates procedures for requesting rulings, determinations, and other guidance from the IRS.... For many VCP filings, the new fees are significantly lower than in the past. Instead of fees based on the number of participants and capped at $15,000, the new fee schedule is based on plan assets and caps out at $3,500 (for a plan with over $10 million in assets)."
Proskauer's ERISA Practice Center


Signature Awards competition for 2018 is open for submissions!

Sponsored by Plan Sponsor Council of America [PSCA]

Don't miss out on recognition for your hard work! Deadline to submit retirement plan education and communication programs: Feb. 9, 2018. Learn more. Winners will be announced at the 71st Annual National Conference May 1-2, 2018, Scottsdale, AZ.

[Guidance Overview]

PBGC Issues Final Regs for Handling Accounts in Terminating Defined Contribution Plans
"The IRS has confirmed that ... amounts transferred from terminating defined contribution plans to the PBGC under the Program will not be treated as taxable distributions subject to reporting and withholding. The DOL has indicated that it intends to review its existing regulations on Safe Harbor for Distributions from Individual Account Plans and Termination of Abandoned Individual Account Plans, both of which provide for distributions to individual retirement plans, to consider transfers to the PBGC under the Program as an appropriate action in such circumstances."
The Wagner Law Group

[Guidance Overview]

New Tax Law Enhances Participant Loan Rollovers
"[A] qualifying participant who desires to defer taxes on the maximum amount of distributions by rolling over all of his or her distributed account in a plan ... will now have significantly more time to accumulate from other sources an amount equal to the accrued and outstanding unpaid principal and interest on any plan loan that was earlier extended to him or her and treated as an offset and then pay and roll over such amount to another qualifying plan or IRA."
Jackson Lewis P.C.

How Can Fiduciaries Use New Tax Cuts to Nudge 401(k) and IRA Retirement Savers?
"Plan sponsors can take actions that will help nudge their employees towards a more comfortable retirement.... The two best ways to implement a higher savings rate would be to amend the plan to add for an auto increase in the plan and the second is for retirement plan advisers to prepare an education meeting demonstrating how an increased savings rate can have little no impact on an employee's take home pay.... [T]he change in tax rates, at least as long as they remain, may make after-tax savings more attractive than tax-deferred savings."
Fiduciary News

Details of the 'Retirement Plan Simplification and Enhancement Act'
"[The Retirement Plan Simplification and Enhancement Act of 2017] seeks to eliminate the current 10% cap on automatically-increased deferral rates of employees who are automatically enrolled in a plan.... [E]mployees who work for three consecutive years with at least 500 hours of service each year would have to be made eligible to participate in an employer's plan, but would be excluded from coverage, top-heavy, and nondiscrimination testing."


Online Learning Course: 401(k) Plan Administration

Sponsored by International Foundation of Employee Benefit Plans [IFEBP]

Learn more about plan design issues, plan investments, fiduciary responsibility and plan fees, employee communications and investment education, automatic enrollment, participant loans, distributions, and plan amendment and termination.

Interesting Angles on the DOL's Fiduciary Rule, Part 75
"In the past, there was a common belief among advisors that fiduciary status could be avoided by presenting a list of investments to plan sponsors.... The belief was that, since the list did not 'recommend' any particular investments, it could not be a fiduciary recommendation. While that may (or may not) have been correct before June 9, it is not correct today. The presentation of a selective list will result in fiduciary status, implicating the prudent man rule, the duty of loyalty, and the fiduciary prohibited transactions."

Fiduciary Standards Now Govern 42 Percent of Advised Retail Assets
"At the end of 2016, nearly $18 trillion in total assets were overseen by all financial advisors ... Of that $18 trillion, about $7.5 trillion -- 42 percent -- was subject to a fiduciary standard, either as part of a broker-dealer fee-based managed account or in a registered investment advisory (RIA) practice ... Investor awareness appears to have played a big role in pushing advisors toward fee-based models."
Advisor News

Should Pension Funds Invest in Bitcoin?
"According to Liew and Hewlett, the historical returns of Bitcoin have compensated for the 'high degree of volatility,' yielding a higher Sharpe ratio than any standard asset class. They also found the cryptocurrency to be 'surprisingly interesting from a diversification perspective,' as it's uncorrelated to other investments."
Institutional Investor

Corporate Pension Plans: Is It Time to Play Defense?
"While the bull market may continue, this could be an ideal time for employers to consider reducing risk in their pension plans ... However, reducing the equity allocation may not be acceptable from a total portfolio expected return standpoint. Enter: defensive equity strategies.... This approach can be particularly useful during the most difficult times for funded status, that is when both equity markets and interest rates are falling, making it a potentially useful de-risking strategy."

Pension Finance Update, December 2017
"Stock markets enjoyed their best year since 2013, but long-term interest rates pushed remorselessly lower and credit spreads narrowed to lows not seen since before the 2008 financial crisis, driving up pension liabilities.... [T]raditional Plan A lost 1% in December but ended the year more than 3% ahead, while the more conservative Plan B dropped a fraction of 1% last month, ending 2017 up more than 1%."
October Three Consulting

Update on Washington State's Retirement Marketplace
"Official launch of [the] Retirement Marketplace is drawing near, and with it, help for Washingtonians to comparison shop for low-cost retirement plans.... [The State Department of Commerce has] five plans from two providers verified for the Retirement Marketplace.... As soon as they're loaded and tested, Washington's Retirement Marketplace will be live and available to the public."
Washington State Department of Commerce

Benefits in General

Five Plan Sponsor Resolutions for 2018
"[1] I will review the documents sent by my vendor before we send them out.... [2] I will understand the provisions of my plan.... [3] I will consult advisers when I need them.... [4] I will know the deadlines for taking important actions ... [5] I will document our plan decisions."
Cohen & Buckmann, P.C.

Executive Compensation
and Nonqualified Plans

[Guidance Overview]

Immediate Action Needed Due to Reduction in Maximum Tax Withholding on Equity Compensation
"As a result of conflicting language between existing Treasury regulations and the revised rates in the Act, it is not clear whether the new withholding rate for wages under $1 million will be 22% or 28%.... Under the financial accounting rules, if shares are withheld in an amount in excess of the maximum statutory rate in the applicable jurisdiction, the award must be classified and accounted for as a liability, resulting in mark-to-market accounting."
Morgan Lewis

[Guidance Overview]

New Opportunity to Defer Tax on Certain Equity Awards and Repeal of Performance-Based Exception to 162(m)
"The Tax Bill creates a new Section 83(i) of the tax code, which allows certain employees of private companies to defer taxation on the exercise of certain stock options or the settlement of restricted stock units for up to 5 years.... Because Section 83(i) requires that 80% of all U.S. employees to be participants, it is likely that only early stage corporations will be able to utilize this deferral opportunity."
Mintz Levin

[Guidance Overview]

Executive Compensation Arrangements for Tax-Exempt Organizations
"This practice note sets out important legal and tax considerations when developing executive compensation arrangements for tax-exempt organizations. It provides guidance on practical steps for attorneys advising their tax-exempt clients on various aspects of executive total compensation packages, including deferred compensation, incentive compensation, severance, vacation, and fringe benefits."
Venable LLP

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BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2018, Inc. All materials contained in this newsletter are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of, Inc., or in the case of third party materials, the owner of those materials. You may not alter or remove any trademark, copyright or other notices from copies of the content.

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